Is UK Solar Dying Due To Nuclear Subsidies?

Is the UK solar industry dying due to the ramping up of nuclear subsidies in the country? Finally giving the green light to the Hinkley Point C nuclear power station, the UK government has ended months of uncertainty surrounding this controversial new project.

In spite of wide evidence that renewable energy will be much cheaper, cleaner, less dangerous, and more reliable, British taxpayers will now be forced to buy Hinkley Point’s nuclear energy (if and when it comes online) at a guaranteed price of a whopping £92.50 per megawatt hour for a full 35 years, no matter how much the wholesale price of power declines during that term.

What does this mean for the UK solar industry? Expertsure, a UK-based home and business energy efficiency firm, states that UK solar PV installers are better off now than they were in 2010. This is in spite of the fact that in 2010 the feed-in tariff (FIT) rate was 41.3p/kWh, and today’s FIT rate in the UK is a mere 4.39p/kWh.

UK Solar Subsidy Cuts

“In February of 2016,” states Expertsure, “the FIT rate dropped some 65% for solar installers, with the locked-in rate changing from 12.47p per kilowatt hour to just 4.39p per kilowatt hour.”

The firm continues, “The result was a shocking drop in installations, with 74% decrease in the rate of solar installations, for a total of 21 megawatts of small solar installed between February and March, in contrast to the 81MW installed during that time in 2015.”

UK Solar FIT Rate Changes 2010-2016. Credit: Expertsure.com/UK

In the wake of these dramatic subsidy cuts and installation decreases, over half the jobs in the UK solar industry have been lost. Incredulously, government overspending was cited as the reason for cutting subsidies for wind and solar.

An official with the UK Department of Energy and Climate Change said, “Falling costs for solar technology and the help available under the tariff programme had led to higher than expected levels of deployment, particularly for solar. But the subsidy cost had also exceeded expectations.”

Under the previous coalition government, a cap known as the levy control framework allowed spending to reach £7.6bn a year by 2020–2021. However, the UK government cited fears that household energy bills would be pushed up to support an overspending of £1.5bn by 2020, so they were “forced” to cut renewable subsidies.

“We are taking urgent action to get a grip of this overspend,” stated the DECC official. “As costs continue to fall and we move towards sustainable electricity investment, it becomes easier for parts of the renewables industry to survive without subsidies.”

£92.50 per megawatt hour of nuclear-generated electricity output is more than twice the current wholesale price, and, with a 35-year price guarantee, it is clear that overspending on nuclear is a moot point in England. They were clearly just making room for it on customers’ household energy bills at the expense of household solar rooftop installations.

Hinkley “Could Cost Taxpayers Almost £30bn in Subsidies”

Reportedly costing £18 billion ($23.7 billion), this will be the first civil nuclear power plant built in the UK in over 10 years. £12 billion of this cost is to be provided by the French state-owned energy firm Electricité de France SA (EDF), and £6 billion is to be provided by EDF’s partner, Chinese state-owned General Nuclear Power Corporation. The two foreign partners will design, build, and operate Britain’s new Hinkley Point C nuclear plant.

However, while £18 billion is the widely advertised price being paid by the French and Chinese, according to The Guardian, the UK National Audit Office (NAO) has said “the project could cost taxpayers almost £30bn in subsidies to these companies.”

In fact, the NAO pointed out that the subsidy bill that households and companies would pay for Hinkley has “more than quadrupled since the agreement for the new nuclear plant was signed in 2013.” The difference between the wholesale price of electricity and the guaranteed price of £92.50 (which is index-linked to inflation), would be “topped up” via a levy tacked onto customers’ energy bills.

In 2013, when the deal was signed, the lifetime cost to consumers for this subsidy was projected at £6.1bn. However, the NAO said, significant cuts to official power price forecasts have dramatically increased the resulting income that Hinkley’s EDF developers will receive from consumer-funded subsidies. Imagine that. Just follow the money and all this overspending on new nuclear power finds an obvious explanation.

UK Solar is More Profitable Now than Ever Before

“While the FIT rate has dropped dramatically,” states Expertsure, “the cost of installation has fallen even more. As a result, solar installations in the UK remain profitable, and competitively so.”

In 2010, when UK solar incentives were at their highest, according to Expertsure, the average rate of return on a domestic solar installation was 4.12%. Today, with the cost of solar installations decreasing an average of 62% since 2010, the average return on a similar solar installation is 4.8%, higher than back in 2010.

UK Solar rate of return from 2010-2016. Credit: Expertsure.com/UK

“Hinkley will Become a Giant White Elephant”

Speaking recently to The Guardian, Green Party MEP Molly Scott Cato referred to UK Energy Department forecasts. “Research has shown that solar power would be a less costly way of generating the equivalent amount of power, and now the government’s own projections show that onshore wind too will be cheaper than nuclear by the time Hinkley is built.”

In July, the NAO reported that “The [energy] department’s forecasts for the levelised cost of electricity of wind and solar in 2025 have decreased since 2010. The cost forecast for gas has not changed, while for nuclear it has increased.”

In spite of governmental axing and slashing of UK solar and wind subsidies since coming to power in May 2015, however, renewables are still hard at work in the country. In the first quarter of 2016, renewables generated 25.1% of the UK’s electricity, according to government data published in August.

“These numbers speak for themselves,” says Niall Stuart, chief executive of the trade body Scottish Renewables. “Onshore wind and solar will be significantly better value than all other large scale sources of power in the UK by 2025.”

Green Party MEP Molly Scott Cato states, “The cost of renewables is tumbling and Hinkley will become a giant white elephant as it struggles to compete with cheaper renewable options.”

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